European Markets Stage Closing Rally

Published 7:00 pm, Monday, March 24, 2003

Associated Press Writer

European stock markets staged a rally shortly before closing Tuesday, buoyed by an upbeat speech from U.S. President George W. Bush on the war in Iraq.

Markets had a relatively volatile session Tuesday, opening lower following depressed markets in Asia amid concern that a prolonged war in Iraq could push up oil prices and weigh on the economy, then closing higher following the upbeat outlook from Washington.

The Dow Jones Stoxx 50 index of European blue chips closed up 1.7 percent at 2,301 Tuesday as markets from London to Madrid took heart from Bush's speech that troops in the U.S.-led coalition are making steady progress.

"The markets are dominated by the news flow out of Iraq," said Christian Kahler, an analyst at DZ Bank in Frankfurt.

Overall, optimism that the war could be over swiftly, reducing the risk of instability across the Middle East and of persistently high oil prices, has faded even as coalition forces close in on Baghdad.

U.S. warplanes and helicopters came under heavy fire Tuesday during their first attacks on elite Iraqi ground units, while tenacious resistance kept the coalition from securing key cities in southern Iraq. With oil prices rising for a second day, investors shunned stocks in favor of fixed-return bonds.

Yet the Bush speech restored hope, giving the European markets a boost

In London, the FTSE-100 index was up by 0.5 percent to close at 3,762.00, while the CAC 40 index of top French companies rose 2.53 percent to close at 2,795.79, while the Amsterdam Exchanges of leading Dutch companies was up 2.81 percent, closing the day at 267.65.

Germany's DAX made the largest gains, surging to 2,627.04, up 3.07 percent as travel giant TUI rebounded from a sharp slide.

"It's very volatile," Kahler said. "The idea that the Americans are encountering massive problems also is probably an exaggeration."

Economists warn that a long war could disrupt international investment flows and put a huge strain on the U.S. budget and trade deficits _ a prospect that has helped depress the dollar.

On Monday, Bush said it would cost $74.7 billion to cover six months of combat, humanitarian aid, rebuilding and bolstered security.

The euro was trading up nearly half a U.S. cent at $1.0695, compared to $1.0648 at Monday's close in Frankfurt. The dollar also fell against the yen, trading at 119.87 yen compared to 120.72 yen Monday in Frankfurt.